DOW JONES NEWSWIRES
Retailers posted mixed October same-store sales, with teen-focused chains posting lower-than-expected sales, as the industry gears up for the critical holiday season.
Teen retailers shares slumped on the news in premarket trading.
But a handful of retailers reported better-than-expected declines - including Stage Stores Inc. (SSI), Stein Mart Inc. (SMRT) and Wet Seal Inc. (WTSLA). Gap Inc.'s (GPS) same-store sales rose 4%, and the casual clothing retailer said it expects fiscal third-quarter earnings above Wall Street's expectations.
October isn't typically a strong sales month for retailers - proving a lull between back-to-school shopping and the holiday season in the final two months. But pent-up demand and cooler weather encouraged spending. And while discounting continues to be a big draw for price-conscious consumers, inventory levels are much leaner than a year ago - reducing the need for fire sales which crushed margins last winter.
Additionally, retailers are facing significantly easier year-ago comparisons, as last year, the industry posted a 4.1% decline in October. Growth of about 2% was expected.
In an early sign of stabilization, Walgreen Co. (WAG) on Tuesday reported same-store sales climbed 4.9% in October, following a strong gain in September and showing the company is rebounding from weakness earlier this year. But peer Rite Aid Corp. (RAD) said same-store sales fell 0.5%. Rite Aid has been shutting stores and trimming costs as it tries to turn around operations.
Discounters have been among the best performers during the recession, but drug stores and apparel outlets were again expected to outperform in October. BJ's Wholesale Club Inc. (BJ) posted a 3.7% gain excluding gasoline sales, while larger rival Costco Wholesale Corp. (COST) posted a 3% increase on that basis in the U.S., both below analysts' expectations. At Target Corp. (TGT), sales dropped 0.1%.
Teen-apparel chains, especially Abercrombie & Fitch Co. (ANF), were expected to be the weakest performers by sector, and most reported even below those estimates.
Abercrombie, which finally began to shed its no-markdown mantra, posted a 15% same-store-sales decrease in October. The company is winding down its high-end Ruehl business and is pushing to expand overseas as it struggles at home. Teen retailers posting higher same-store sales included Buckle Inc. (BKE), up 4.3%, and Aeropostale Inc. (ARO) rising 3%. But American Eagle Outfitters Inc. (AEO), which was projected to report growth in October, saw sales fall 5%.
Department stores showed a mixed performance, with Macy's Inc. (M) and J.C. Penney Co. (JCP) down 0.8% and 4.5%, respectively, both under expectations. Kohl's Corp. (KSS) also missed, reporting sales rose 1.4%. But Nordstrom Inc. (JWN) posted a better-than-anticipated jump.
Other downside surprises included Limited Brands Inc. (LTD) and Zumiez Inc. (ZUMZ), reporting lower sales of 4% and 8.9%, respectively.
-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com